How do retailers best balance the demand to get goods to customers quickly with the need for efficiency? Sean Fleming reports
LIKE VETERANS OF a bygone era, the number of people to whom the phrase “30 days post and packing” has any meaning gets smaller with each passing year. Yet that’s the point from which all ecommerce deliveries can trace their roots. Mail order catalogues, classified ads in newspapers and magazines, advertisements on TV – distance shopping in the distant past was a simpler but slower affair. You wrote out your order, posted it and then you waited. You really waited: 30 days, a whole month. Sometimes it would be longer.
If a retailer asked a shopper in 2016 to wait a whole month for delivery, they’d laugh before placing the order with a competitor. Modern retailers that are too slow get left for dead since shoppers will only buy from those retailers that don’t keep them waiting. Who among us hasn’t hopped from one queue to another in a supermarket or Post Office in the faint hope of reducing the wait time? People are equally impatient online, but they have even fewer reasons to stick around if they’re not happy.
Unlike physical stores, where shoppers get to pick which queue to wait in but have no influence over how fast each one moves, shoppers in the online world have far more control. Can’t find the convenient delivery option you wanted? Abandon cart. Shop elsewhere. Keeping up with customers is now the name of the game and it’s where leaders in the Operations & Logistics Dimension demonstrate the skills and strategies that keeps them ahead of their competition.
From drones to the sharing economy, from in-flight schedule changes to same-hour delivery, meeting the needs of customers now drives innovation in the retail logistics sector.
Free, free, set them free
One of the heaviest millstones hanging around the neck of the retail operations and delivery ecosystem is the word ‘free’. Free delivery used to be everyone’s weapon of choice when it came to online customer acquisition. Sometimes it still is. But the flipside of pulling in lots of customers with free delivery is that retailers set a level of expectation from which it’s hard to break away. The thing about ‘free’ is that it induces people to say, “Why not?” Rather paradoxically, it doesn’t make customers think they are getting great value for money. Nor does it leave them feeling inclined to start paying for something that at one point was being given away.
While the industry has struggled to cope with having shot a revenue stream in the foot, the only option open, in terms of getting customers to willingly spend more for service, has been to offer services that are obviously of greater value.
That hasn’t just meant speedier delivery, although clearly that’s important, as the shift from three-five days, to next-day, to same-day (or even same-hour) confirms. For along with speed, there has also been a drive toward something that gets referred to as ‘convenience’, despite it not being immediately clear who the beneficiary of all this convenience is meant to be.
Two years ago, there were still moderately sensible conversations to be had regarding the use of drones (the quad-copter variety) as mainstream delivery vehicles. No one regards that as a serious prospect anymore – not for the mainstream. However, in more remote locations there is a greater need, a greater will and a greater chance of user adoption of aerial drone delivery.
Now, however, there is more talk of wheeled drones, such as those from Starship, as a realistic urban parcel delivery alternative. There are, no doubt, some robust financial and technological reasons for the use of such drones. Financial factors are important, of course, but are they the most important consideration? That honour really goes to the customer, so will customers find delivery by self-driving micro-vehicles acceptable, or convenient? It might be a technology better suited to some urban environments but while a person delivering takeaway food to an apartment isn’t greatly inconvenienced by an entry-phone buzzer, set of stairs, elevator or doorbell, can the same be said of R2D2?
’Free’ delivery induces people to say, “Why not?” Rather paradoxically, it doesn’t make customers think they are getting great value for money
Stand and deliver
Click and collect has set the ecommerce world on fire in recent years, and was credited by many as having helped avert disaster in the wake of Black Friday 2014, when much of the UK retail delivery network was pushed to its limits. From that point on, shoppers took click and collect to their hearts, and its popularity has soared.
Routing parcels for collection rather than home delivery is good news for anyone seeking to relieve the pressure on a delivery network. Also, being able to make one delivery and drop off multiple parcels simultaneously is clearly advantageous for the retailer and carrier.
Being able to offer same-day delivery means tapping into customers’ ‘I want it now’ outlook
Shoppers no longer have to miss a parcel being delivered simply because it never will be delivered, of course. From Collect+ to Cornerdrop, from DPD Pickup shops to Doddle, Parcelly and more besides, it’s now easy for shoppers to select somewhere to collect their parcels from. But does ‘easy’ automatically equate to ‘convenient’?
Whether a choice between the newsagent on one street and the dry cleaners on the next is really a great leap forward in convenience is a moot point. But any loss of convenience to the customer is probably being offset by giving them more control. Or maybe this is a lesser of two evils equation and shoppers will put up with a trip to a shop if it means not having to miss a delivery.
This is the day
When you place an order online, you won’t always know where you’re likely to be on the day delivery is due to occur. However, you will know where you are when you place the order. Being able to offer same-day delivery means retailers can tap into the ‘I want it now’ outlook or plain old-fashioned urgency that leads to a purchase. In this scenario, retailers are also far less likely to be dealing with failed deliveries.
Same-day delivery is nothing new in the B2B space – car parts and building materials being two great examples of commodities that have been available for same-day delivery for decades. But it’s an option that has caught on with consumers in the last 12 months. Although Amazon always manages to hog the limelight, and has done so repeatedly with Prime Now becoming incrementally more available across the UK, it was perhaps Argos, now owned by Sainsbury’s , that blazed the biggest same-day trail when it unveiled Fast Track in 2015.
Sainsbury’s is one of the retailers that has ranked the highest in this year’s InternetRetailing IRUK Top500 in this Performance Dimension. Same-day delivery and collection are becoming an increasing part of the Sainsbury’s offer, with 28 stores offering same-day delivery click and collect, as well as nominated day/time slots, which are only on offer from around 12% of the rest of the Top500. The company is adjusting its entire offer in order to adapt to changing shopper behaviour, as well as delivery expectations. This, coupled with same-day delivery of thousands of non-food items for just £3.95 through the Argos network, could put the supermarket out in front for years to come.
David Gray, retail analyst at Planet Retail, thinks there are plenty of positive indicators: “Sainsbury’s has been very transparent regarding adapting its formats to the changing retail paradigm – trialling a mini c-store concept and six future-format outlets. The former provides a potential, if somewhat uncertain, growth opportunity, especially considering the previous Fresh Kitchen débâcle. The latter may drive footfall into larger stores through layout changes, enhanced checkout options and by adding third-party concessions.
“Add to this the fact that Sainsbury’s estate is structurally advantaged with fewer very large stores and the outlook for saballes performance going forward may not be so bleak after all. Profits, however, are another matter entirely.”
However, if the shift to same-day really is going to take off in the near future, it’s going to require far greater changes to the retail delivery network than anything any of us have seen so far.
The times they are a-changin’ Going three-five days to next-day was a big leap for many, but it is essentially little more than tightening up existing processes and practices. In effect, it is about being leaner and shortening the amount of time between each existing step.
Offering same-day services means being something else altogether – agile. For the same-day part of the business, each working day will begin with a blank sheet, a fresh page and, more importantly, unbooked capacity. The more retailers hang their hats on same-day, the larger this capacity will have to be. For unlike any other delivery proposition, when offering same-day, retailers won’t know how busy they will be until the moment the orders start to either trickle or flood in on the day itself. The number of vans, drivers and drops are all unknown quantities.
The so-called ‘sharing’ economy, also referred to as the ‘demand’ or ‘gig’ economy, may offer some of the answers here. Being able to call upon a retinue of self-employed couriers and pay them per drop, increasing and decreasing the number in line with demand, means same-day services can be offered without the heavy burden of a potentially idle workforce.
Yet it is a road paved with more than a little uncertainty. HMRC is now taking an interest in the use of self-employed drivers in the delivery sector, and some of the drivers and riders themselves are beginning to voice disquiet too as the recent Uber case showed.
Adamo Dagradi, head of communications at Italian home delivery specialist Milkman, sees this uncertainty as one of the big issues facing the sector: “There’s a lot of unrest among crowdsourced drivers all around the world. Delivery boys and girls, in both the food/grocery and parcel sectors, are moving towards more or less improvised forms of unionisation.
“They demand to be considered as employees and not ‘collaborators’ and want better wages, possibly tied to the number of hours worked, not to the number of deliveries carried out.”
This new crossroads, where professional couriers and freshly conscripted amateurs meet, is not necessarily going to lead to delivery nirvana. But if that sounds bleak, does it mean there’s no role for the sharing economy in the retail operations and logistics sector?
Perhaps that depends on what you plan to share. The example set by Asda with the launch of its toYou delivery service, could be one to watch. The idea is a simple one. If retailers have networks made up of vehicles, people, and premises, they are always going to have spare capacity, which acts as a fixed cost. If, however, retailers can sell, trade, or share some of that capacity, they can reduce those fixed costs.
Speed, in delivery, used to mean one simple thing – getting a parcel to the recipient’s address quickly. Not any more. Speed is now a necessity in all considerations of the retail operations and logistics network. Yes, there is still the issue of making faster delivery a standard. It’s just that it now goes far beyond that.
It means not just being lean but also being agile, so that retailers can go from initial idea to service deployment quickly. It means having an awareness of what ‘convenience’ means to the customer – not just to the retailer and carrier – and being ready to react accordingly. It also means being able to transform your network, from stores to vehicles, when patterns of customer behaviour change.